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MULTILATERAL INVESTMENT GUARANTEE

AGENCY (MIGA) AND GEORGIA
Prepared by the BLC Law Office

BLC Law Office

4, Gudiashvili Square
Tbilisi, 0114, Georgia
Telephone: (995 32) 292 24 91, 292 00 86
Facsimile: (995 32) 293 45 26
Email: blc@blc.ge
Web: www.blc.ge

INTRODUCTION
 What is MIGA?
The Multilateral Investment Guarantee
Agency (MIGA or the Agency) is a member of
the World Bank Group. Its mandate is to
promote foreign direct investment (FDI) in
developing countries by providing guarantees
(political risk insurance) to investors and
lenders.
MIGA guarantees protect investments against
non-commercial risks and can help investors
obtain access to funding sources with
improved financial terms and conditions.
The main function of MIGA is to insure cross-
border investments made by investors in any
MIGA member country into a developing
member country.
The agency derives its unique strength from
the World Bank Group and from its structure
as an international organization whose
shareholders include most countries of the
world. This enables MIGA to provide an
umbrella of deterrence against government
actions that could disrupt projects, and assist
in the resolution of disputes between investors
and governments.
The agency works closely with public and
private political risk insurance providers to
increase insurance capacity. MIGA can act as
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the arranger for a project’s total insurance
requirements.
Effective from April 12, 1988, MIGA
Convention was adopted on October 11, 1985
with subsequent amendments in November
14, 2010.
 Membership and Structure
MIGA’s membership is open to all members of
the World Bank and to Switzerland. There is,
however no obligation for the World Bank
members to join the Agency. Georgia is MIGA
member since December 1992.
The Agency’s principal office is located in
Washington, D.C., USA. It has a three-tiered
structure, consisting of:
 Council of Governors;
 Board of Directors;
 President.
 Covered Risks and Eligibility
MIGA can help investors and lenders deal
with these risks by insuring eligible
projects against losses relating to:
 Currency convertibility and transfer
restriction;
 Expropriation and measures tantamount
to expropriation;
 War, terrorism and civil disturbance;
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 Breach of contract; which some other form of direct

 Non-honoring of sovereign financial investment is present.
obligations.
 Other forms of investment, such as
technical assistance and management
Eligible Investors - MIGA insures investments
contracts, asset securitizations, capital
made by investors of a MIGA member country
market bond issues, leasing, services,
into a developing member country. In certain
and franchising and licensing
cases, the agency may also insure an
agreements.
investment made by a national of the host
country, provided the funds originate from In keeping with MIGA’s objective of
outside that country and the host government promoting economic growth and
specifically approves the investment. development, projects supported must be
Corporations or financial institutions are financially and economically viable,
eligible for coverage if they are either environmentally sound, and consistent with
incorporated in and have their principal place the labor standards and development
of business in a member country or if they are objectives of the country.
majority-owned by nationals of member
OPERATIONS
countries.
 Issuance of Guarantee
Investments by state-owned corporations are
also eligible if they operate on a commercial To qualify for a guarantee the investor on the
basis. Investments by a non-profit ne hand, and the investment, on the other,
organization may be eligible if it is established
must meet the eligibility criteria listed above.
that the specific investment will be carried out
on a commercial basis. MIGA will not conclude any contract of
guarantee before the “host government has
Eligible Investments: Cross-border direct
approved the issuance of the guarantee by the
investments insured by MIGA, include: Agency against the risks designated for cover”.
 Equity investments, shareholder loans,
and shareholder loan guaranties,
provided the loans have a minimum  Pricing
maturity of more than one year.
Insurance premium rates are decided on a per-
 Non-shareholder loans, if they relate project basis and vary by country, sector,
to a specific investment or project in transaction and the type of risk insured.

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Premiums are due at the beginning of each
contract period.
 Duration of Guarantee
MIGA provides coverage for a minimum of
three years (more than one year for loans) and
a maximum of up to 15 years (and possibly 20
years if justified by the nature of the project).
Once a guarantee is issued and effective,
MIGA may not terminate the contract unless a
default occurs, but the guarantee holder may
reduce or cancel coverage without any penalty
on any contract anniversary date starting with
the third anniversary.
 Amount of Coverage
For equity investments, MIGA can guarantee
up to 90 percent of the investment, plus up to
an additional 500 percent of the investment
contribution to cover earnings attributable to,
and retained in, the project. For loans and loan
guaranties, MIGA generally offers coverage of
up to 95 percent of the principal (or higher as
determined on a case-by-case basis), plus up to
an additional 150 percent of the principal to
cover interest that accrues over the term of the
loan. For technical assistance contracts and
other contractual agreements, MIGA can
insure up to 90 percent of the total value of
payments due under the insured agreement
(up to 95 percent in exceptional
circumstances).
Regardless of the nature of the project, an
investor is required to remain at risk for a
portion of any loss. MIGA can currently issue
up to $220 million of coverage on its own
account for a single project, and can cover
significantly higher additional amounts
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through reinsurance arrangements. The
agency can also mobilize additional coverage
through coinsurance programs with other
political risk insurers, including through its
Cooperative Underwriting Program.
MIGA has no minimum investment amount.
 Reinsurance
MIGA is authorized to provide reinsurance to
institutions of members issuing investment
guarantees, to regional investment guarantee
agencies1 and to private insurers in member
states.
Reinsurance arrangements shall be structured
do that the Agency or the reinsured entity will
have equivalent rights of subrogation and
arbitration to those the Agency would have if
it were primary guarantor.
 Payment of Claims
In order to ensure prompt payment of claims,
decisions will be taken by the President in
accordance with the contracts of guarantee
and such policies as the Board may adopt and,
in cases of dispute, final determination may
depend on the outcome of arbitration between
the Agency and the investor concerned.
It is envisaged that these policies will require
the guarantee holder to seek such
administrative remedies as may be appropriate
under the circumstances, if they are readily
available under the laws of the host country
and may provide for reasonable periods of
1 Such does not exist in Georgia at present.
MIGA and Georgia

time to elapse so as to maximize the prospects
to amicable settlement of claims between
investors and host countries.
It is expected that the specific time limits, to
be included in the guarantee contracts, would
be consistent with the practice of other
political risk insurers. However, the Agency
may establish such limits in its rules and
regulations and may incorporate them into the
contracts of guarantee in order to increase the
attractiveness of its services.
 The Small Investment Program (SIP)
MIGA’s SIP program is designed to facilitate
investment into small and medium-size
enterprises (SMEs) involved in the finance,
agribusiness, manufacturing, and services
sectors.
Investments are eligible for coverage under
the SIP if they are related to the establishment
of an SME, or made into an existing SME, in a
developing member country. In order to
qualify as an SME, the project enterprise must
fulfill at least two of the following criteria:
 no more than 300 employees;
 total assets not more than $15
million;
 total annual sales not more than $15
million.
Investments in the financial sector are eligible
under the SIP if they are geared toward
providing financial services for SMEs, and at
least 50 percent of clients related to the
investment are SMEs as defined above.
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The SIP offers:
 coverage up to $10 million (the actual
size of the investment may be bigger);
 a guarantee package covering
currency transfer;
 restriction, expropriation, and war,
terrorism, and civil disturbance*;
 no application fee for eligible smaller
investors;
 a quick approval process
The SIP has no restrictions with respect to the
size of the investor. However, the program is
specifically designed to assist small and
medium-size investors (SMIs). The application
fee is waived for SMIs. In order to qualify as
an SMI, the company must have no more than
375 employees and fulfill one of the following
additional criteria: have no more than $50
million in assets or $100 million in annual
sales.
APPLICATION PROCESS
MIGA’s guarantee issuance process begins
when a client submits a Preliminary
Application. The application is free,
confidential, short, and it can be done online.
As soon as MIGA receives the application,
they will assign an underwriter to review it to
determine whether the project meets
eligibility criteria. MIGA will then contact the
client to discuss the project.
At this point the underwriter discusses
preliminary pricing with the client, the
potential size of the guarantee, and the
MIGA covers that are most appropriate for the
investment. MIGA also works with the client
to identify environmental and social impact
assessments that must be undertaken.
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The next step is for the client to submit a
Definitive Application (the form will be
provided by MIGA’s underwriting
team). After receiving the completed
Definitive Application, MIGA begins a
thorough review of the project. To ensure a
quick underwriting process, the project
sponsors must submit supporting
documentation, which MIGA reviews to
ensure that the project meets their policies and
guidelines. The supporting documentation
MIGA requires to begin the formal
underwriting process typically may include:
 Feasibility study or a business plan
supporting the economic viability and
financial soundness of the project;
 Financial forecast/ model;
 All loan documentation,
including shareholder and non-
shareholder loans (drafts acceptable
during underwriting) and all loan-
related documents;
 All loan guaranties (including back-
stop guarantees from parent
companies);
 Financial statements and incorporation
documents/by-laws from the investor
and the project enterprise in the host
country;
 Environmental permits/environmental
impact assessment if applicable;
 Land purchase/lease agreements;
 All other applicable project licenses/
permits/ agreements/contracts.
 Fees
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Definitive Application Fee: $5,000 for cover
of less than $25 million and $10,000 for larger
amounts. The application fee is applied toward
the initial premium or, if MIGA rejects the
project for any reason, the fee is refunded.
Processing Fee: Additional fees may be
required for complex projects. For example,
fees may be required to cover the cost of site
visits for environmental and social due
diligence.
Syndication Fee: If applicable, a fee will be
applied when MIGA arranges a project’s total
insurance requirements through reinsurance.
 Review, Disclosure, and Due Diligence
by MIGA and Duration of the Process
Before MIGA undertakes extensive
underwriting, the Agency’s management
conducts a preliminary assessment of the
project’s development impact, risk profile, and
compliance with our legal and policy
requirements.
The duration of the underwriting process
depends on the complexity of the project.
Complex projects requiring extensive
environmental and social due diligence will
take longer, but most projects can be
underwritten in four to six months or less.
Projects under the Small Investment Program
can be processed in one to two months if all of
the required documentation has been
provided.
DISPUTE RESOLUTION
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A dispute may arise when an investor alleges
that the government has breached its
contractual obligations or expropriated its
investment. Conversely, a dispute may be
brought by a host government alleging that
the investor has breached its contractual
obligations. Both sides may disagree about
who is at fault and about how the aggrieved
party should be compensated. MIGA uses its
"good offices" in these cases to examine areas
of responsibility and potential liability, and to
help the parties reach an agreement that
would settle the dispute to the satisfaction of
both sides.
If the parties are unable to settle their dispute
and a claim for compensation is brought by an
investor under a MIGA guarantee, the Agency
will review the facts of the dispute and make a
formal determination. If MIGA finds for the
insured investor, they will pay the
compensation to which the investor is entitled
under the guarantee. Under the terms
of MIGA’s Convention, MIGA is then
permitted to seek reimbursement of such
payments from the host government.
The Convention establishes procedures for
four different types of disputes:
 Questions of interpretation or
application of the Convention arising
between any member and the Agency or
among any members will be decided by
the Board subject to the possibility of
appeal to the Council.
 Disputes arising under a contract of
guarantee or reinsurance between the
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Agency and the other party will, if not
solved amicably, be submitted to
arbitration in accordance with the rules
contained or referred to in the contracts
of guarantee or reinsurance;
 Disputes between the Agency as
subrogee of an investor and a member
shall be settled either in accordance with
the Convention or in accordance with an
agreement to be entered into between
the Agency and that member on
alternative dispute settlement
mechanisms;
 Disputes other than those listed above,
which arise between the Agency and
any member or agency thereof as well as
all disputes between the Agency and a
former member will be settled through
negotiations and failing this, according
to conciliation and arbitration.
Arbitration proceedings shall be instated by
means of a notice by the party seeking
arbitration (the claimant) addressed to other
parties of the disputes. The respondent shall
within 30 days after the date of notice receipt,
notify the claimant the name of the arbitrator
appointed by it. The two parties shall within
the period of 30 days from the date of
appointment of second arbitrator, select a
third arbitrator who shall act as the President
of the Arbitral Tribunal.
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MIGA CONTACT INFORMATION

Multilateral Investment Guarantee Agency

1818 H Street, NW
Washington DC
20433 USA
Tel: 202.458.2538
Fax: 202.522.0316
Web: www.miga.org

Disclaimer: this Brochure is prepared by BLC Law Office based on the legislation/information
effective as of the date of its preparation.

It is prepared solely for informative purposes and cannot substitute legal advice and/or cannot be used
by third parties for similar purposes. Brochure contains general information and does not list any and
all items related to the reviewed issue in details.

This Brochure is limited to the matters directly addressed herein and shall not be deemed applicable
to the explanations, clarifications or matters other than expressly contemplated herein.

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USEFUL INFORMATION
Projects with MIGA Guarantee in Georgia

Project name: Adjaristsqali Hydro Project, Georgia

Fiscal year: 2014
Status: Proposed
Guarantee holder: Tata Power International Pte. Ltd.
Investor country: Singapore
Host country: Georgia
Sector: Power
Date SPG disclosed: April 10, 2014
Projected Board date: June 12, 2014
Gross exposure: $64.0 million
Project type: Non-SIP

Project name: GeoCapital, Georgia

Fiscal year: 2013
Status: Proposed
Guarantee holder: Principals of a microfinance organization operating in Georgia
Investor country: United States
Host country: Georgia
Sector: Banking
Date SPG disclosed: April 19, 2013
Projected Board date: May 03, 2013
Gross exposure: $2.0 million
Project type: SIP
Project name: ProCredit Group Central Bank Mandatory Reserves Coverage
Fiscal year: 2012
Status: Active
Guarantee holder: ProCredit Holding AG & Co. KGaA

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Investor country: Germany

Host country: Georgia
Sector: Banking
Date SPG disclosed: October 28, 2011
Project Board date: December 01, 2011
Gross exposure: $13.5 million
Project type: Non-SIP

Project name: ProCredit Group Central Bank Mandatory Reserves Coverage

Fiscal year: 2011
Status: Active
Guarantee holder: ProCredit Holding
Investor country: Germany
Host country: Georgia
Sector: Banking
Date SPG disclosed: October 05, 2010
Project Board date: November 23, 2010
Gross exposure: $9.0 million
Project type: Non-SIP

Project name: International Commercial Black Sea Bank (Georgia) S.A.

Fiscal year: 1997
Status Not Active
Guarantee holder: Commercial Bank of Greece, S.A.
Investor country: Greece
Host country: Georgia
Sector: Banking
Gross exposure: $2.0 million
Project type: SIP

MIGA and Georgia